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Former GM of Moutai in custody

By Jiang Jingjing (China Daily)
Updated: 2007-05-22 06:38

Qiao Hong
Kweichow Moutai confirmed yesterday that its former general manager, Qiao
Hong, is in custody and under investigation for corruption.

The company said it received a notice from the State-owned assets
supervision and administration commission of the Guizhou provincial
government, the local state assets watchdog, on Friday evening, saying
Qiao is suspected of taking bribes from a sponsor at the 2002 World Cup
in South Korea.

There were rumors that Qiao accepted a bribe of at least 3 million yuan
from a Shandong -based tour agency, which helped organize Moutai
distributors' travel to South Korea.

Two different billing contracts, worth 5 million yuan and 8 million yuan,
have been found between Moutai and the travel agency, insiders said.

The company had no immediate comment. Moutai's stock price dropped 1.83
percent to 96.63 yuan per share yesterday.

Related readings:
Where's Qiao Hong?
Maotai shares re-open for trading Rumors increase as shares suspended
Maotai gains from age of consumption

The investigation is focused solely on Qiao and would not influence the
company's day-to-day operations, Moutai said in a statement.

A report from Guotai Jun'an Securities said the scandal will have just a
short-term effect on Moutai's sales and production.

The company will be un-affected in the long term thanks to strong brand
recognition and the high demand for its products. Moutai's distribution
channel is not likely to be influenced either, the report noted.

However, an insider was quoted by the Economic Observer as saying that
Qiao's problem is the tip of the iceberg. The investigation's next target
would be the company itself.

A Kweichow Moutai booth at a fair in Nanjing, capital of East China's
Jiangsu Province. Yang Xi

Moutai is one of the country's most popular and profitable distillers of
traditional Chinese liquor. Since taking over in 2000, Qiao helped raise
the firm's sales from 980 million yuan in 1999 to 6.2 billion yuan last
year.

The stock, a favorite of investors at home and abroad, was one of China's
best-performing major stocks last year. In January it became the first
mainland stock to rise above 100 yuan in nearly six years.

Shareholders have wondered about Qiao's whereabouts for the last two
weeks. When rumors surfaced that he was under investigation, Moutai
shares plunged and the firm was forced to suspend trading on May 10.

Trading was reopened on May 14 when the firm said Qiao was appointed to a
new job at the State-owned assets supervision and administration
commission of Guizhou provincial government.

(China Daily 05/22/2007 page14)

(For more biz stories, please visit Industry Updates)

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